Big Crisis For Small Business In Australia: Report

Published August 23, 2019 (last updated July 17, 2020) -

There’s a small business crisis in Australia, according to the free market thinktank Institute of Public Affairs.

The IPA is urging the Australian Government to cut red tape, make it easier to create jobs and cut taxes that discourage growth.

Red tape “costs the Australian economy $176 billion a year”, according to the IPA, who also add that the World Economic Forum (WEF) ranks Australia 77th out of 140 countries for burden of government regulation in its 2018-19 Global Competitiveness Report.

Australia’s market labour regulation has “consistently” been ranked as one of the biggest problems for small businesses, according to the report. The WEF report puts Australia at 110th in the world for hiring and firing flexibility.

Meanwhile, the IPA condemns Australia’s corporate tax rate as discouraging to business growth. The small business tax rate is currently set at 27.5%, set to drop to 25% by 2021.

“Entrepreneurship in Australia is in decline and small business employment growth has collapsed,” the report says.

“Small businesses and entrepreneurs play a critical role in aligning resources to meet consumer preferences, increasing productivity, and creating jobs.

“However, government red tape, high taxes, and a rigid industrial relations system have created an economic environment hostile to small business. This is reflected in declining rates of self-employment, rising rates of incumbency, and declining small business growth.”

Since 2000, the rate of small business owner-managers with employees has fallen from 8% to 6%, while fewer Australians are being employed by small businesses.

In 2017, only 44 per cent of all workers were employed in small businesses (defined as having less than 20 employees) – meanwhile employment in businesses with more than 200 employees are now employing 32% of workers, up from 27% in 2007.

Earlier this week, the Australian Small Business and Family Enterprise Ombudsman released a statement supporting the findings of the report, calling them “deeply concerning”.

“A major issue is Australia’s rigid industrial relations system,” the Australian Small Business and Family Enterprise Ombudsman Kate Carnell said.

“The research cites World Economic Forum surveys, which have consistently found Australia’s Labour Market regulation is the most problematic factor for doing business.

“Part of that broad picture is ensuring small business owners can feel confident they can meet their obligations and avoid an unfair dismissal claim in the event they need to let a worker go.

“That’s why my office has recommended a number of important changes and additional checklists to the Small Business Fair Dismissal Code.

“A clearer Code would reduce the risk of unfair dismissal claims and provide small business owners with the impetus they need to hire more staff.

“The government has announced a review into the industrial relations system. The Small Business Fair Dismissal Code should be number one on that agenda.”

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